Corn looks to be on track for a fifth straight lower high, with the spot July contract at least holding up above a cluster of moving averages (including the key 100-day MA), but the new-crop December plunging through that support level overnight. The bears are expecting better Midwest rains this week to slow plummeting crop ratings, and a more beneficial pattern to finally develop into the critical month of July, holding yield prospects somewhere near trend-type levels and avoiding a supply-side disaster.
Rains mostly favored the Dakotas and northern Nebraska over the past 24 hours, moving through the belt this week into the weekend, with the heaviest rains seen in NE and southern IA/northern MO, and good coverage likely in the ECB over the next five days as well. Extended maps continue to show above-normal precipitation for the Plains and Midwest up into mid-July,
The predominate fundamental story in the market right now is weather and what impact it has had on US yields. There is little doubt that the US corn yield has been reduced, but by how much is hard to predict. While there are several years that are comparable to this one, the advancement in genetics and farming practices has likely buffered loss potential. At this time most analysts feel the US has lost 500 million bu of corn production due to drought conditions. While this is possible, the US would still see its ending stocks increase 305 million bu from last year, even with this loss. It is also likely that the higher futures that have followed production losses will trim demand, which was already suspect to begin with. It is not out of the question the US could lose a sizable volume of production this year and still see its stocks to use ratio widen. This possibility is keeping corn futures in check when the market rallies, especially with the US already the highest priced source in the global market. The real concern should be on soybeans as the US cannot afford any yield loss this year given our ongoing tight stocks to use that are holding at a rationing level.
Have a great day!